Rethinking the Risks of Poverty: A Framework for Analyzing Prevalences and Penalties
David Brady, Ryan Finnigan & Sabine Hübgen
American Journal of Sociology, November 2017, Pages 740-786
This article develops a framework for analyzing the risks of poverty in terms of prevalences (share of the population with a risk) and penalties (increased probability of poverty associated with a risk). A comparison of the four major risks (low education, single motherhood, young headship, and unemployment) across 29 rich democracies reveals there is greater variation in penalties than prevalences. The United States has high poverty partly because it has the highest penalties despite below average prevalences. Also, U.S. poverty in 2013 would be worse with prevalences from 1970 or 1980. There is little evidence that penalties discourage prevalences, while welfare generosity significantly moderates the penalties for unemployment and low education. The authors conclude that a focus on risks does not provide a convincing explanation of poverty, single motherhood may be the least important of the risks, and studies based solely on the United States are constrained by potentially large sample selection biases.
Food insecurity and child behavior problems in fragile families
Economics & Human Biology, February 2018, Pages 14-22
Food insecurity remains a persistent problem in the United States. Several studies have shown that food insecurity is associated with child externalizing and internalizing behavior problems. However, some potential methodological limitations remain. For example, most studies use a household measure of food insecurity while there is evidence that children, especially younger ones, tend to be shielded by their parents from experiencing food insecurity. In addition, the mechanisms through which food insecurity affects children are not well understood. This study uses longitudinal data from the Fragile Families and Child Wellbeing Study to address these limitations. Fixed-effects models show that the association is even larger using a measure of child food insecurity instead of a household one. Correlated-random effects models show a large difference in child behavior problems between food secure and food insecure children due to unobserved heterogeneity. In addition, the association between child food insecurity and child externalizing behaviors remains largely unexplained while food insecurity among adults explains almost all the variation in the association with child internalizing behaviors. Food insecure children and parents are at risk of micronutrient deficiencies, which may lead to behavior problems in young children. These findings underscore the need for greater focus on reducing the risk of food insecurity, especially for children in fragile families, in order to reduce behavior problems and improve their educational attainment.
Spillovers from Costly Credit
Review of Financial Studies, forthcoming
Low-income households with proximate access to payday loans exhibit greater economic distress, higher take-up of food assistance benefits, and greater delinquency on child support payments than peers without proximate loan access. These findings suggest that borrowing can exacerbate distress, leading borrowers to use transfer programs and to prioritize payday loan payments over other liabilities like child support. In that way, payday lending produces negative externalities – costs imposed on taxpayers that fund transfer programs and nonresident family members that fail to receive child support.
The Minimum Wage, EITC, and Criminal Recidivism
Amanda Agan & Michael Makowsky
Rutgers Working Paper, January 2018
For recently released prisoners, the minimum wage and the availability of state Earned Income Tax Credits (EITCs) can influence both their ability to find employment and their potential legal wages relative to illegal sources of income, in turn affecting the probability they return to prison. Using administrative prison release records from nearly six million offenders released between 2000 and 2014, we use a difference-in-differences strategy to identify the effect of over two hundred state and federal minimum wage increases, as well as 21 state EITC programs, on recidivism. We find that the average minimum wage increase of 8% reduces the probability that men and women return to prison within 1 year by 2%. This implies that on average the wage effect, drawing at least some ex-offenders into the legal labor market, dominates any reduced employment in this population due to the minimum wage. These reductions in re-convictions are observed for the potentially revenue generating crime categories of property and drug crimes; prison reentry for violent crimes are unchanged, supporting our framing that minimum wages affect crime that serves as a source of income. The availability of state EITCs also reduces recidivism, but only for women. Given that state EITCs are predominantly available to custodial parents of minor children, this asymmetry is not surprising. Framed within a simple model where earnings from criminal endeavors serve as a reservation wage for ex-offenders, our results suggest that the wages of crime are on average higher than comparable opportunities for low-skilled labor in the legal labor market.
Unemployment Insurance as a Housing Market Stabilizer
Joanne Hsu, David Matsa & Brian Melzer
American Economic Review, January 2018, Pages 49-81
This paper studies the impact of unemployment insurance (UI) on the housing market. Exploiting heterogeneity in UI generosity across US states and over time, we find that UI helps the unemployed avoid mortgage default. We estimate that UI expansions during the Great Recession prevented more than 1.3 million foreclosures and insulated home values from labor market shocks. The results suggest that policies that make mortgages more affordable can reduce foreclosures even when borrowers are severely underwater. An optimal UI policy during housing downturns would weigh, among other benefits and costs, the deadweight losses avoided from preventing mortgage defaults.
Estimating minimum adequate foster care costs for children in the United States
Haksoon Ahn et al.
Children and Youth Services Review, January 2018, Pages 55–67
Although foster care homes play a crucial role in providing stable placements to children who enter the child welfare system due to maltreatment, there is currently no federal minimum rate nor standard methodology to establish adequate rates to support foster parents to meet these children's needs. Therefore, it is important to establish a model to estimate the real costs associated with caring for children to serve as a foundation for states to set adequate reimbursement rates. The objectives of this study are to: use the methodology of a 2007 study to establish foster care minimum adequate rates for children (MARC) based on the child's age and geographical location in every state; update the MARC with cost of living adjustments to 2016; examine changes in gaps between the MARC and the current foster care rates; and identify states that have made increases to their reimbursement rates, relative to the MARC over time. Results found that all but four states provide lower foster care reimbursement rates than the adequate costs in 2016. This study recommends that, at the federal level, enhanced precision in operational definitions of care categories could increase consistency in the way that states reimburse foster families. Additionally, findings provide policy suggestions to establish a national methodology standard and increase foster care rates to the level that will meet children's needs. This study will enhance the scant body of literature found on establishing an economic model to estimate foster care costs.
Participation in the Supplemental Nutrition Assistance Program and maternal depressive symptoms: Moderation by program perception
Rachel Bergmans et al.
Social Science & Medicine, January 2018, Pages 1-8
Methods: Data were from the fragile Families and Child Wellbeing Study (FFCWS). Logistic regression models with individual-specific fixed-effects, were fit to SNAP-eligible mothers who changed SNAP participation and depression status (N = 256) during waves 2 to 4. Perceptions of government assistance were defined as feelings of humiliation or loss of freedom and tested for interactions with SNAP participation.
Results: Perceptions of government assistance moderate the association between SNAP participation and depression (p-interaction = 0.0208). Those with positive perceptions of welfare had 0.27 (95% CI = 0.08 to 0.89) times lower odds of depression when enrolled vs. not enrolled in SNAP. Among those with negative perceptions of welfare, SNAP enrollment was not associated with depression (OR = 1.13; 95% CI = 0.85 to 1.51).
The Long-Run Effects of the Earned Income Tax Credit on Women's Earnings
David Neumark & Peter Shirley
NBER Working Paper, December 2017
We use longitudinal data on marriage and children from the Panel Study of Income Dynamics to characterize women’s exposure to the federal and state Earned Income Tax Credit (EITC) during their first two decades of adulthood. We then use measures of this exposure to estimate the long-run effects of the EITC on women’s earnings as mature adults. We find some evidence indicating that exposure to a more generous EITC when women were unmarried and had young (pre-school) children leads to higher earnings and hours, and perhaps wages, in the longer run. We also find some evidence that exposure to a more generous EITC when women had young children but were married leads to lower earnings and hours in the longer run. These longer-run effects are to some extent consistent with what we would expect if the short-run effects of the EITC on employment that are documented in other work, and predicted by theory, are reflected in effects of the EITC on cumulative labor market experience (and other consequences of labor market attachment) that influence earnings.
Prenatal stress accelerates offspring growth to compensate for reduced maternal investment across mammals
Andreas Berghänel et al.
Proceedings of the National Academy of Sciences, 12 December 2017, Pages E10658–E10666
Across mammals, prenatal maternal stress (PREMS) affects many aspects of offspring development, including offspring growth. However, how PREMS translates to offspring growth is inconsistent, even within species. To explain the full range of reported effects of prenatal adversity on offspring growth, we propose an integrative hypothesis: developmental constraints and a counteracting adaptive growth plasticity work in opposition to drive PREMS effects on growth. Mothers experiencing adversity reduce maternal investment leading to stunted growth (developmental constraints). Concomitantly, the pace of offspring life history is recalibrated to partly compensate for these developmental constraints (adaptive growth plasticity). Moreover, the relative importance of each process changes across ontogeny with increasing offspring independence. Thus, offspring exposed to PREMS may grow at the same rate as controls during gestation and lactation, but faster after weaning when direct maternal investment has ceased. We tested these predictions with a comparative analysis on the outcomes of 719 studies across 21 mammal species. First, the observed growth changes in response to PREMS varied across offspring developmental periods as predicted. We argue that the observed growth acceleration after weaning is not “catch-up growth,” because offspring that were small for age grew slower. Second, only PREMS exposure early during gestation produced adaptive growth plasticity. Our results suggest that PREMS effects benefit the mother’s future reproduction and at the same time accelerate offspring growth and possibly maturation and reproductive rate. In this sense, PREMS effects on offspring growth allow mother and offspring to make the best of a bad start.